Custom, Excise & Service Tax Tribunal
Shree Vijayalakshmi Charitable Trust vs -Principal Commissioner Of Gst& ... on 25 April, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal Nos. 40162 & 40163 of 2023
(Arising out of Order-in-Original Sl. No. 06-07/2018-COMMR. dated 25.06.2019
passed by Commissioner of GST & Central Excise Coimbatore)
M/s. Shree Vijayalakshmi Charitable Trust, ....Appellant
107-A, Senguptha Street, Ramnagar,
Coimbatore-641 009.
Versus
Commissioner of GST and Central Excise ..Respondent
6/7, A.T.D. Street, Race Course, Coimbatore-641 018.
APPEARANCE:
Shri K. Sankaranarayan, Advocate for the appellant Shri Anoop Singh, Authorised Representative for the Respondent CORAM:
HON'BLE MR. M. AJIT KUMAR, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V., MEMBER (JUDICIAL) FINAL ORDER Nos.40481-40482/2025 DATE OF HEARING: 03.03.2025 DATE OF DECISION:25.04.2025 Per: Mr. Ajayan T.V.
M/s. Shree Vijayalakshmi Charitable Trust, the appellant herein, has preferred these appeals assailing the impugned Orders-in- Original Sl. Nos. 06-07/2018-COMMR. dated 25.06.2019 (OIO) whereby the adjudicating authority, upon adjudicating two Show Cause Notices, together spanning the period from 01.01.2013 to 31.03.2014, 2 has held that the appellant has provided taxability service under the category of 'Renting of Immovable Property' service under Section 65B(44) and 65B(51) which includes Declared Service under Section 66E. By the impugned OIO, invoking extended period of limitation, the adjudicating authority confirmed a demand of Rs.50,75,26,810/- towards service tax payable including cesses, under Section 73(1) of the Finance Act, 1994 (ACT) read with Section 73 (2) of the Act read with Section 174 of the CGST Act, 2017 (CGST Act) for the period from 01.01.2013 to 31.03.2014, along with interest at appropriate rates. In respect of the first notice, the adjudicating authority imposed a penalty of Rs.11,98,32,990 on the appellant under first proviso to Section 78(1) of the Act read with Section 174 of the CGST Act and in respect of the second notice, a penalty of Rs.13,39,30,415/- under Section 76 of the Act read with section 174 of the CGST Act was imposed. Further, a penalty of Rs.40,000 under section 77(2) of the Act read with Section 174 of the CGST Act for each violation in respect of both the notices was also imposed.
2. The facts relevant to the analysis of the issue at hand are that the appellant holds Service Tax Registration for provision of 'Renting of Immovable Property' and has, in terms of Section 70 of the Act, self- assessed the service tax liabilities in respect of the appellant's property, namely, SIV tower at Avinashi Road, Coimbatore and filed periodical STC returns.
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3. Based on intelligence that one M. Palanisamy was providing mining services, a taxable service in terms of Section 65(105) (zzzy) of the Act, to the appellant, without discharging the Service Tax liability thereon, a letter dated 12-07-2013 was addressed to him seeking details about the nature of activity undertaken by him along with connected documents. Shri M. Palanisamy in his reply dated 12.08.2013 stated, inter-alia, that:
i. He obtained the land at SF No. 33, 33/1, 33/2, 50/5, 50/3F.
64/5, 66, 66/1, 66/2, 67 and 68, Palathurai Village, Madukkarai, Coimbatore South Taluk measuring 22.68 acres from the appellant on lease for 5 years w.e.f. 29-01-2010. The Annual Lease Rent is Rs. 22,680/- (Rs. 1000/- per acre) and an advance of Rs. 25,000/- was paid. An Agreement to this effect was executed and registered before the Sub-Registrar, Madukkarai on 11-02-2010.
ii. He obtained the land at SF No. 32, Palathurai Village, Madukkarai, Coimbatore South Taluk measuring 14.86 acres from the appellant on lease for 5 years w.e.f. 17-05-2010. The Annual Lease Rent is Rs. 14,860/- (Rs. 1000/- per acre) and an advance of Rs. 25,000/- was paid. An Agreement to this effect was executed and registered before the Sub-Registrar, Madukkarai on 19-07-2010.
iii. He had not raised documents for payment of Lease amount to the appellant and the amounts were paid by cheque. 4 iv. He was under the bona fide belief that he had performed mining work on the land obtained on lease from the appellant and this being a self-service, no Service Tax is payable on the mining work.
4. Thereafter, vide letter dated 26-08-2013, Shri M. Palanisamy (lessee) stated inter alia that:
i. He has been carrying out mining activity at the Palathurai site. ii. The mining of blue metal is done by blasting the rocks by using ammonium nitrate and the rocks are removed and sent to primary crusher, which crushes the rocks into boulders. The boulders are sent to secondary crusher for breaking it to the desired size of ½ inch or ¾ inch blue metals. The blue metal is sold to retail buyers onsite and is used for construction and road forming works.
iii. While producing the blue metal, coarse material of unsize / smaller size would come. These are sent to Ortner for making it into M-sand or Silica sand. These are sold to outside lorry people for retail construction market.
iv. He furnished the details of payment received towards quarrying and carrying away the minerals for the period from January 2010 to March 2012.5
v. He furnished the details of payment made to the appellant from February 2010 to March 2012.
5. Subsequently, vide his letter dated 10-10-2013, Shri M. Palanisamy (lessee) furnished the "Lease Rent payable' and 'Lease Rent paid' for the period from April 2012 to September 2013. The lessee also provided copy of Joint Agreement dated 27-07-2010 between the appellant (Lessor), Lessee and the District Collector, Coimbatore "for quarrying and carrying away minor minerals by lessees in Ryotwari Lands in which the minerals belong to Government". The preamble of the agreement too acknowledges the fact of the appellant (lessor) leasing out the said land to the lessee for the purpose of quarrying Rough Stone.
6. A statement was recorded from Shri M. Palanisamy on 10-12- 2013, wherein he inter-alia reiterated the leasing of 22.68 acres of land and 14.86 acres of land in Palathurai Village belonging to the appellant from 29-01-2010 and 17-05-2010, for which rent of Rs.22,680/- and Rs.14,860/- per annum, respectively, is paid. It was further stated that these lease agreements were registered before the Sub-Registrar, Madukkarai on 11-02-2010 and 19-07-2010 respectively. He further stated that by parallel private agreements dated 29-01-2010 and 17- 05-2010, the appellant permitted him to mine the leased land and sell minerals and in return he was required to pay 75% of the sales receipts as additional rent on monthly basis and he had been paying them. It was further stated that he had been mining silica sand and blue metal 6 from the leased lands and selling them and all work relating to mining and crushing was done by himself and not sub-contracted.
7. On an analysis of the lease documents and other records provided by the lessor Shri. M. Palanisamy, as well as his statement dated 10- 12-2013, the Department was of the view that leasing of the vacant lands at Palathurai by the appellant to Shri M. Palanisamy is a taxable service under the Act and that the appellant had not paid service tax on the renting of land for mining. The officers of the Department visited the appellant on 10-10-2013 and obtained certain documents such as Income Tax Returns of the appellant for the assessment year 2013-14 with balance sheet and the ledger pertaining to the Lessor Shri. M. Palanisamy for the period from April 2012 to September 2013, which on perusal, indicated that the appellant had shown receipt of huge amounts in the ledger accounts and income and expenditure statement from lease rent of mining land. The profit and loss account of Shri M. Palanisamy too showed corresponding entries towards the payment of "lease rent" to the appellant. It was also noted that the Assistant Commissioner of Income Tax, TDS Circle, Coimbatore had issued a certificate bearing No.0312DD149B on 24.07.2012 authorizing Shri M. Palanisamy to pay "RENT" up to Rs.150 Crores to the appellant without deduction of TDS. From the above it appeared that the appellant had received rent from Shri M. Palanisamy towards lease of its lands at Palathurai Village but no Service Tax was paid there on. 7
8. The appellant vide letter dated 22-10-2013, pursuant to a visit from the officers of the Department on the same day, stated, inter-alia, that:
i. The appellant Trust was formed in 1992 and the main activities were providing education scholarship to students to continue higher education. In addition, they assist in providing medical facility in Government Hospital and also provided donations to Government Schemes. ii. The main source of income of the appellant is through rent from buildings owned by them and also rent received from vacant lands leased.
iii. The appellant is registered with service tax department under 'Renting of immovable property service' and are paying tax on rent received from buildings and are filing ST-3 returns regularly for the above.
iv. The appellant was not aware of service tax liability on leasing of the vacant land at Palathurai Village w.e.f 01-07-2012 as they were of the opinion that the same is exempted from service tax.
9. Subsequently the appellant vide letter 18.11.2013 addressed to the Commissioner of Central Excise and Service Tax, Coimbatore stated 8 that there are in the process of consultation with legal experts and would revert soon. Later, by their letter dated 07.12.2013 the appellant informed that they are opting to pay tax under Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) for the period up to December 2012. According, the appellant filed a declaration in Form VCES-I declaring Service Tax liability of Rs. 26,30,69,990/- for the period from 01.07.2012 to 31.12.2012 and paid 50% of the said amount on 30.12.2013. The Show Cause Notice Sl.No. 16/2014-Commr dated 08.08.2014 was therefore issued to cover the tax liability from 01.01.2013 to 31.08.2013 demanding an amount of Rs.23,96,65,980/- invoking extended period along with appropriate interest and proposal to impose penalties under various sections of the Act. In continuation of the above Show Cause Notice Sl. No. 16/2014 dated 08.08.2014, one more Show Cause Notice Sl. No. 2/2015 dated 27.03.2015 demanding Service Tax of Rs.26,78,60,830/- for the period from 01.09.2013 to 31.03.2014 along with applicable interest and proposing imposition of penalty under various sections was also issued.
10. Pursuant to the notices, the appellant filed writ petitions before the Hon'ble High Court of Madras and obtained interim injunctions restraining the adjudicating authority from adjudicating the show cause notices and upon dismissal of the writ petitions by the Hon'ble High Court vide order dated 23.10.2018 finding that they were devoid of merits, the proceedings were recommenced by the adjudicating authority. The authorised representative of the appellant attended a personal hearing on 29.04.2019 and thereafter a common reply dated 9 16.05.2019 was filed by the appellant in respect of both the Show Cause Notices contending, inter-alia, that:
i) The consideration received from the lessee represented Revenue from the sale of minerals and the revenue from sale of minerals has suffer Value Added Tax at the hands of the lessee and cannot therefore be subjected to Service Tax.
ii) That the Revenue sharing agreements demonstrated that the lessee was performing mining and quarrying of Blue mental and Mineral sand from lands owned by the appellant and the two parties were sharing the revenue realized from sale of the quarried resources. This is a turnover liable to Value Added Tax and was indeed subjected to VAT and no service provided nor was any specific consideration agreed upon for provision of any service.
iii) The entire 100% receipt from the mining of quarrying resources having been already subjected to applicable VAT at the hands of the lessee. VAT and Service Tax are mutually exclusive and the transaction involving sale of goods being a subject matter of state levy cannot be subjected to Service Tax. Reliance was placed on the decisions in:
a) Gujarat Ambuja Cements Ltd. v. UOI, 2006 (3) S.T.R. 608 (S.C.)
b) BSNL v. UOI,2006 (2) S.T.R. 161 (S.C.) 10
c) Imagic Creative Pvt. Ltd v. CCE, (2008 (9) S.T.R. 337 (S.C.)
iv) That the instant transaction was a revenue sharing agreement and the Hon'ble Supreme Court has stated that Revenue sharing agreement are not exigible to Service Tax. Reliance was placed on the decisions in:
a) New Horizons Ltd. Vs Union of India, (1995) 1 SSC 478
b) Faqir Chand Gulati vs Uppal Agencies Pvt. Ltd., 2008 (12) STR 401 (SC).
c) Commissioner vs Mormugao Port Trust - 2018 (19) GSTL J118 (SC)
d) ACL Mobile Ltd. Vs CCE, Delhi 2019 (20) GSTL 362 (Tri.-
Del.)
e) The Executive Engineer, Urban Division, Tamil Nadu Water Supply and Drainage Board, Madurai vs CCE, ST Madurai 2018 (5) TMOI 1467-CESTAT, Chennai
f) Cricket Club of India Ltd vs CST, Mumbai 2015 (40) STR 973 (Tri.-Mum.)
v) That the tax liability cannot be imposed solely based on nomenclature and accounting treatment. That the Revenue sharing agreements termed the profits realized from extraction and sale of the quarried resources as 'additional lease amounts.' These profits were accounted for in the Noticee's books of accounts as 'additional lease amounts.' The demand 11 in the instant case is based entirely on the accounting treatment meted out to the profits, and the nomenclature of the profits in the revenue sharing agreement. That the nomenclature mentioned in the agreements, or in its accounting records would not change the substance of transaction itself. It is a settled principle of law that the substance of the transaction must be seen in order to tax the same. When the transaction is in substance one for sharing of revenue earned from quarrying of minerals and metals, the profits shared cannot be subjected to tax simply because the appellant has accounted for it as 'additional lease amounts.' Reliance is placed on the decisions in:
a) Moped India Ltd. Vs Assistant Collector of Central Excise, Nellore 1986 (23) ELT 8 (SC)
b) CCE, New Delhi vs D.C.M. Textiles 2006 (195) ELT 129 (SC)
c) B.S.C Footwear Ltd. Vs Ridgway (Inspector of Taxes) [1972] 83 ITR 269
d) Tuticorin Alkali Chemicals & Fertilizers Ltd., Madras vs Commissioner of Income Tax, Madras [1997] 227 ITR 172(SC)
vi) The onus of proving taxability is on the department. Reliance was placed on the decisions in :
a) Union of India and others vs Garware Nylons Ltd. And others 1996 (87) ELT 12 (SC) 12
b) Commissioner of CE, Pondicherry vs ACER India Ltd.
2004 (172) ELT 289 (SC)
vii) The activity under dispute i.e. mining or quarrying of blue metal and subsequent processing into river sand is a process which amounts to manufacture. It is well settled that any process amounting to manufacture or production of goods is specified in the negative list of services under Section 66D(f) of the Act. Section 66D(f) of the Act states that services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption are not services on which service tax would be liable. Reliance is place on the decision in Hindustan Construction Co. Ltd. Vs CCE, Chandigarh 1997 (089) ELT 123 (Tri.-L.B.)
viii) That the payment made under protest towards the first instalment of VCES under Letter dated 16.12.2013 cannot be used to crystallize liability for the subsequent periods. The declaration in FORM VCES-1 erroneously filed by the Noticee under pressure and payment made under protest ought not to prejudice its case before the Department.
ix) The lease agreement specifies the lease rent payable and there can be no presumption regarding the consideration agree on 13 foreign activity. Reliance is placed on the decision in Akzo Nobel India Ltd vs CCE, Kanpur 2018 (11) GSTL 420 (Tri.-All.)
x) Extended period of limitation is not invokable and penalties are not imposable. Reliance was placed on the decisions in:
a) Commissioner of Central Tax vs. Zee Media Corporation.
2018 (18) G.S.T.L. 32 (All)
b) Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise, Meerut. rr2005 (188) E.LT. 149 (SC)
c) Continental Foundation It. Venture v. CCE. Chandigarh-L 2007 (216) ELT.177 (S.C.)
d) CCE, Mumbai IV v. Damnet Chemicals Pvt. Ltd., 2007 (216) ELT 3 (S.C.)
e) Padmini Products Limited v CCE, 1989 (43) ELT 195 (SC)
f) Pushpam Pharmaceuticals Company v. CCE, 1995 (78) ELT 401 (SC).
g) Hindustan Steel Ltd. v. State of Orissa, 1978 (2) ELT (J159) (SC),
h) Bajaj Travels Ltd. vs Commissionr of Service Tax, 2012 (25)( STR 417 (Del)
i) CCE vs. Madras Aluminium Co. Ltd. 2017 (349) E.LT. 133 (Mad)
j) Secretary, Town Hall Committee v. CCE 2007 (8) STR. 170 (Tri. - Bang)
k) CCE vs Sikar Ex-serviceman Welfare Coop. Society Ltd.
2006 (4) ST.R. 213 (Tri -Del) 14
l) Haldia Petrochemicals Lad. v. CCE 2006 (197) ELT. 97 (Tri-
Del)
m) Siyaram Silk Mills Lid. v. CCL 2006 (195) ELT. 284 (Tri. -
Mumbai)
n) Fibre Foils Ltd. v. CCE 2005 (190) ELT. 352 (Tri-Mumbai)
o) Ispat Industries Ltd v CCE, 2006 (199) ELT 509 (Tri-Mum)
p) NIRC Ltd v CCE, 2007 (209) ELT 22 (Tri-Del)
q) Chemicals & Fibres Ltd v CCE, 1988 (33) ELT 551 (Tri)
r) Avian Overseas Pvt Ltd v. Commr of C.Ex, Cus. & ST,BBSR-
II, 2009 (15) STR 540 (Tri-Kol)
11. Subsequently, the Adjudicating Authority confirmed the demands as above mentioned. Aggrieved by which the appellant has preferred this appeal and is now before this Tribunal.
12. Ld. Counsel Shri K. Sankaranarayanan appeared and argued for the appellant. His submissions are as under:
A. The agreements for sharing of revenue earned from mining of metals evidence the nature of the transaction. The Revenue- sharing agreements demonstrate that the lessee was executing the mining activities on the Appellant's lands, and that the two parties were sharing the profits realized from sale of the quarried resources namely Blue metal and Mineral sand. It is supported by the permission granted by the District Collector vide his order dated 27.07.2010 and sub-Registrar, 15 Madukkarai and the APPENDIX V a registered document dared 27.07.2010 signed by the appellant represented by A. Senthilkumar, Shri M. Palanisamy and the District Collector.
B. The transaction alleged as 'Renting of Immovable Property' is a joint venture, undertaken for mutual profit and it is settled that co-venturers in a joint venture are not be liable to Service Tax on a joint venture in light of the Doctrine of mutuality. In revenue-sharing arrangements, the two contracting parties act on principal-to-principal basis and one does not provide service to another as is evident from the notarized agreement dated 29.01.2010 & 17.05.2010 (Annexure No.4 Page No.121 to 131 of appeal paper book). This is supported by the permission dated 27.07.2010 at Annexure A and reference No.279/2010/MMI dated 27.07.2010 of the District Collector, Coimbatore to the Sub-Registrar, Madukkarai at Annexure B and APPENDIX V, a registered document dated 27.07.2010 at Annexure C signed Shri. A. Senthilkumar, for the appellant, Shri. M. Palanisamy and the District Collector. Reliance is placed on Department Circular No.109/3/2009-ST dated 23.02.2009 at Annexure H for the contention that revenue sharing agreements where contracting parties act on a principal-to-principal basis will not be liable to tax. Reliance is also placed on the decisions in:
a) New Horizons Ltd vs Union of India, (1995) 1 SCC 478 (Annexure D) 16
b) Faqir Chand Gulati vs Uppal Agencies Pvt. Ltd., 2008 (12) STR 401 (SC) (Annexure E)
c) Commissioner vs. Mormugao Port Trust-2018 (19) GSTL J118 (S.C) (Annexure F)
d) ACL Mobile Ltd. vs. CCE, Delhi 2019 (20) GSTL 362 (Tri Del.) (Annexure G)
e) B.G. Exploration & Production India Ltd. vs COMMISSIONER OF CGST & CX, NAVI MUMBAI, 2022 (64) G.S.T.L. 578 (Tri.
Mumbai) (Annexure I)
f) B.G. Exploration & Production India Ltd. vs COMMISSIONER OF CGST & CX, NAVI MUMBAI, 2022 (63) G.S.T.L. 351 (Tri. Mumbai) (Annexure J)
g) Commissioner of Service Tax vs Inox Leisure Ltd, 2022 (61) GSTL 342 (SC) (Annexure K)
h) Inox Leisure Ltd. vs Commissioner of Service Tax, Hyderabad , 2022 (60) GSTL 326 (Tri.-Hyd.) (Annexure L)
i) Sir Ganga Ram Hospital vs Commissioner of Service Tax, New Delhi, 2020 (43) GSTL 390 (Tri.- Del.) (Annexure M)
j) Niraj Prasad vs Commissioner of C. Ex. & S.T., Kanpur 2020 (38) GSTL 78 (Tri.-All.) (Annexure N)
k) Commr. of S.T., Delhi-III vs Bharuch Dahej Railway Company Ltd, 2020 (34) GSTL 565 (Tri.- Del.) (Annexure O)
l) KPH Dream Cricket Pvt. Ltd. vs Commr. of C. Ex. & S.T., Chandigarh-I,2020 (34) GSTL 456 (Tri.-Chan.) (Annexure P)
m) Commr. of C. Ex. & Cus., Hyderabad-III vs Ushakiron Television , 2019 (24) GSTL 267 (Tri.-Hyd.) (Annexure Q) 17
n) Ambience Hospitality P. Ltd. vs Commr. of C. Ex., Delhi-IV, 2019 (21) GSTL 400 (Tri.-Del.) (Annexure R)
o) Sir Ganga Ram Hospital vs Commr. of Central Excise, Delhi-I, 2018 (11) GSTL 427 (Tri.-Del.) (Annexure S)
p) PVS Multiplex India Pvt. Ltd. vs Commr. of C. Ex., Meerut- I,2018 (10) GSTL 496 (Tri.-All.) (Annexure T)
q) Times Internet Ltd. vs Commr. of C. Ex (Adj.), New Delhi , 2017 (4) GSTL 33 (Tri.-Del.) (Annexure U)
r) Mormugao Port Trust vs Commr. of Cus., C. Ex. & S.T., GOA, 2017 (48) STR 69 (Tri.-Mumbai) (Annexure V)
s) Centre for development of Advance Computing vs C.C.E. Pune, 2016 (41) STR 208 (Tri.-Mumbai) (Annexure W)
t) AB Motions Pvt. Ltd. vs Commr. of C.E. & ST., Ludhiana, 2019 (4) TMI 2043-Cestat Chandigarh (Annexure X) u) Commr. of C.E & ST, GOA vs Goa Golf Club Pvt. Ltd, 2023 (5) TMI 1026-Cestat Mumbai (Annexure Y)
v) Meghraj Cinema vs Commr. of ST, Mumbai-VII, 2024 (8) TMI 1053-Cestat Mumbai (Annexure Z) w) Commr. Of CE & ST Ludhiana vs AB Motions Pvt. Ltd, 2024 (5) TMI 1061-SC Order (Annexure ZZ)
x) Hardy Exploration and Production (India) Inc. vs Commr. of GST & CE, Chennai, 2024 (1) TMI 456-Cestat Chennai(Annexure ZZZ) y) Spencer International Hotels Ltd. vs Commr. of GST & CE, Chennai Service Tax, 2023 (6) TMI 999-Cestat Chennai (Annexure a) 18 C. The demand is based on mere surmises and the receipt from the lease cannot be characterized as consideration for service. Without examining the underline transaction or ascertaining if it is indeed a transaction exigible to Service Tax, the amounts apportioned between the appellant and the lessee for the revenue earned from mining and sale of quarried resources were sought to be included in the taxable value of renting of immovable property services ignoring the fact that the instant transaction is one of revenue-sharing. Reliance is placed on the decision in The Executive Engineer, Urban Division, Tamil Nadu Water supply and Drainage Board, Mumbai vs CCE & ST Madurai, 2018 (5) TMI 1467-Cestat Chennai (Annexure b) for the contention that every flow of money between two entities or persons would not be termed as consideration, unless the money flow implied a reciprocal promise to be done on part of the recipient of the money at the behest of the person making the payment. Reliance is also place on Cricket Club of India Ltd. vs CST, Mumbai 2015 (40) STR 973 (Tri.-Mum), (Annexure c) to contend that existence of consideration cannot be presumed in every money flow.
D. Liability cannot be imposed only based on nomenclature and accounting treatment. That the revenue-sharing agreements termed the profits realized from extraction and sale of the quarried resources as 'additional lease amounts'. These profits 19 were accounted for in the Appellant's books of accounts as 'additional lease amounts'. The demand in the instant case is based entirely on the accounting treatment meted out to the profits, and the nomenclature of the profits in the revenue sharing agreement. The nomenclature mentioned in the agreements, or in its accounting records would not change the substance of transaction itself. It is a settled principle of law that the substance if the transaction must be seen in order to tax the same. In the instant case, the transaction is in substance one for sharing of revenues earned form quarrying of minerals and metals, and therefore the profits shared cannot be subjected to tax simply because the Appellant has accounted for it as 'additional lease amount'. Reliance is placed on Moped India Ltd. vs Assistant Collector of Central Excise, Nellore 1986 (23) ELT 8(SC), (Annexure d), CCE, New Delhi vs DCM Textiles 2006 (195) ELT 129 (SC) (Annexure e), B.S.C Footwear Ltd. vs Ridgway (Inspector of Taxes) [1972] 83 ITR 269, Alkali Chemicals & Fertilizers Ltd., Madras vs Commr. of Income Tax, Madras [1997] 227 ITR 172 (SC). (Annexure f) and Taparia Tools Ltd. vs Joint Commissioner of Income Tax, 2015 (3) TMI 853- (Annexure g).
E. The demands in the notices are incorrect. The lease rent as per the lease agreements in INR 1,000/- per acre per annum. The annual lease rent is INR 22,680/- and INR 14,860/-. Therefore, the astronomical demands for INR 23,96,65,980/- 20 and INR 26,78,60,830/- are baseless, in as much as there is no correlation between the amount received by the Appellant for leasing out its lands, and the amount received as a portion of the revenue earned from mining of quarried resources. That the term 'additional lease rent' has incited the tax demand, with no reasonable basis and merely because the appellant already rents out its land and buildings, and merely because the agreements employ the term 'additional rent', the appellant has been issued with a demand for Service Tax. F. The onus is on the department to establish taxability of the transaction and places reliance on decisions in Union Of India and Others vs Garware Nylons Ltd. and others 1996 (87) ELT 12 (SC) (Annexure h), Commr. of CE, Pondicherry vs ACER India Ltd 2004 (172) ELT 289 (SC) (Annexure i) and Maruthi Tex Print & Processors Pvt. Ltd. vs Customs & Central Excise Settlement Commission, 2011 (8) TMI 665- (Annexure k). G. The finding at paragraph 21.8.5 of the impugned order, where it was concluded that there is no joint control over the operation and that the intention was to render service for the consideration agreed upon in the agreement is refuted. The impugned order is incorrect in this regard as a perusal of the agreements would show that there has been a grant of several rights to the lessee, namely (1) lease of land by trust to the lessee, (2) grant of permission to extract minerals from the 21 land, and (3) grant of permission to sell the extracted minerals. These rights that are otherwise vested exclusively with the appellant, have been conferred on the lessee. The lease rent collected is towards grant of possession of land, and the consideration computed as a sum equal to 75% of the receipts earned by sale of minerals, is in furtherance of revenue-sharing agreement between the lessor and lessee. The lessor and lessee in the instant case, have agreed to undertake the activity of mining the land for minerals. In order to commence mining activity on the land, capital expenditure to be made on plant and machinery necessary for the activity has to be considered by the lessee. On the other hand, the fact that subjecting the land to mining activity may render the land unfit for any other usage in the future, has to be considered by the lessor. From the above considerations, it has to be seen that the risks associated in such an activity have been duly factored and jointly undertaken by the parties, and that the profits have been thereby shared in a fixed ratio depending upon the quantum of risks borne by the parties. That therefore, this act of jointly tolerating the risks involved in the said activity constitutes a shared obligation, and that the same is sufficient to show that there exists joint control and responsibility. The agreement clearly demonstrates the revenue sharing agreement that subsists between the lessor and lessee. The terms of the agreement specifies that "the lessee has agreed to pay every month a sum equal to 75% of 22 the receipts earned by sale of minerals'. This goes to show that the lessor shares a portion of whatever is the proceeds from monthly sale of extracted minerals. This in itself shows that there is a shared obligation on the part of the lessor with respect to the sale and it is supported by the permission granted by the District Collector vide his order 6.279/2010/ 1 dated 27-07-2010 and reference Ref. No. 279/2010/MM1 dated 27-07-2010 of the District Collector Coimbatore to the Sub Registrar, Madukkarai and the APPENDIX V a registered document dated 27-07-2010 signed by A Senthilkumar for the appellant, Shri M. Palanisamy and the District Collector The permission of the District Collector demonstrates the responsibilities of the appellant and Shri M. Palanisamy before, during and after the work undertaken. It may please be noted that the work involved had social, economical and environmental issues also. Therefore, the Impugned Order is incorrect inasmuch as it holds that the agreement does not constitute a revenue-sharing agreement.
H. The fact that the appellant has obtained TDS exemption certificate cannot conclusively decide that the proceeds from mining of let out land amounts to additional rent. Reliance is placed on Circular No.96/7/2007 -ST dated 23.08.2007 to content that exemption in the context of Public charitable institution under Income Tax Law is different from Central Excise and Service Tax Lax and is of no consequence or 23 relevance for Service Tax purposes. Reliance is also placed on the decision in CCE, Pune vs Dai Ichi Karkaria Ltd. 1999 (112) ELT 353 (SC) wherein it was held that judgments relating to Income Tax has no relevance while considering a provision in an excise statue. The main source of income for the Appellant Trust is through rent from buildings owned by them and also rent received from vacant lands leased and since the appellant is registered under the erstwhile Service Tax regime to discharge service tax under the head "Renting of Immovable Property", wherever liable, the Appellant would discharge Service Tax at the applicable rates and would file the ST-3 Returns diligently. Thus, merely because of availment of exemption under a different law will not ipso facto determine the nature of service under the Finance Act, and in case any deficiency is noticed under income tax it is responsibility of the central excise authorities to bring it the notice of the income tax authorities for remedial action but in this case the deficiency happened under IT Act is being misused to levy the service tax which is not correct.
I. The impugned transaction is in the nature of sale, liable to VAT and therefore consideration received from the lessee representing revenue from the sale of minerals cannot be subjected to service Tax. Section 65B(44) of the Act defines services that are exigible to service tax under Section 66B of the Act and the definition of service expressly excludes a 24 transaction which constitutes nearly a transfer of title in goods for a consideration. The entire 100% of receipts from mining of quarried resources has already been subjected to applicable VAT at the hands of the lessee. The levy of VAT and Service Tax are mutually exclusive and reliance is placed on the decisions in Gujarat Ambuja Cements Lad. v. UOL, 2006 (3) S.TR. 608 (S.C.), Bharat Sanchar Nigam Limited vs UOI reported at 2006 (2) ST.R. 161 (S.C.) (Annexure 1), Imagic Creative Pvt. Ltd v. CCE, 2008 (9) STR. 337 (S.C.) (Annexure
m), ) White Cliffs Hair Studio Private Ltd, Vs Additional Commissioner, Office Of The Principal Commissioner Of CGST And Central Excise, 2012 (8) TMI 105-( Annexure n). J. The present activity is a process amounting to manufacture and thus would not be exigible to service tax. The appellant is a manufacturer and Shri M. Palanisamy was a hired labour and as a manufacturer, the appellant has manufactured/ produced stones/gravel/sand etc. which were chargeable to excise duty/exempted goods and so the question of charging service tax on the goods manufactured/produced in India will not arise. Reliance is placed on the decisions Hindustan Construction Co. Ltd. vs CCE, Chandigarh, 1997 (089) ELT 123 (Tri.-L.B.) (Annexure O).
K. In as much as the lease agreements specify the lease rented payable by lessee there can be no presumption regarding the 25 consideration agreed on for an activity. The department cannot rely on the revenue sharing agreement to state that the revenue receipt are termed as additional lease rent and also ignore the fact that lease agreement specified amount payable as lease rent. Reliance is place on the decision in Akzo Nobel India Ltd. vs CCE Kanpur 2018 (11) GSTL 420 (Tri.-All.) (Annexure P).
L. The extended period of limitation could not have been invoked and the appellant cannot be saddled with the allegation of "suppression" for the reasons that:
• The transaction is itself outside the Service tax net. • The entire demand has been sourced from the documents produced by the Appellant.
• There was no Suppression with an intent to evade payment of tax • The issue involves statutory interpretation, having travelled up to the Hon'ble Supreme Court • Suppression cannot be alleged in a situation where the Department was aware of the Appellant's activities. 26 • The District Collector vouched the entire activity by signing the APPENDIX V as a representative of Govt of Tamil Nadu Reliance is placed on the decisions in Commissioner of Central Tax vs. Zee Media Corporation. 2018 (18) G.S.T.L. 32 (All) (Annexure q), Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise, Meerut, 2005 (188) E.LT. 149 (SC) (Annexure
r), Continental Foundation It. Venture v. CCE. Chandigarh-L 2007 (216) ELT.177 (S.C.), CCE, Mumbai IV v. Damnet Chemicals Pvt. Ltd., 2007 (216) ELT 3 (S.C.) and Padmini Products Limited v CCE, 1989 (43) ELT 195 (SC) in this regard.
M. That penalty is not imposable for the reasons that the Appellant was under a bona fide belief that no service tax was liable to be paid and since the appellant had reasonable cause to believe that no service tax was liable to be paid, the benefit of Section 80 must be extended to the instant case. The issue involves interpretation of law and for that reason also extended period cannot be invoked. Reliance is placed on the decisions in:
a) Pushpam Pharmaceuticals Company v. CCE, 1995 (78) ELT 401 (SC).
b) Hindustan Steel Ltd. v. State of Orissa, 1978 (2) ELT (J159) (SC),
c) Motor World case- Karnataka high Court 27
d) Bajaj Travels Ltd. vs Commissionr of Service Tax, 2012 (25)( STR 417 (Del)
e) Chetak Traveling Agency v CCE, Jaipur, 2017-TIOL-2481- CESTAT-DEL
f) Star Neon Singh v CCE, 2002 (141) ELT 770 (Tri-Del)
g) Flyingman Air Courier Private limited v CCE, 2004 (170 )ELT 417 (Tri-Del)
h) ETA Engineering Ltd v CCE, 2004 (174) ELT 19 (Tri-LB)
i) Medpro Pharma Private Ltd v CCE, 2006 (4) STR 322 (Tri-Del)
j) CCE vs. Madras Aluminium Co. Ltd. 2017 (349) E.LT. 133 (Mad)
k) Secretary, Town Hall Committee v. CCE 2007 (8) STR. 170 (Tri. - Bang)
l) CCE vs Sikar Ex-serviceman Welfare Coop. Society Ltd. 2006 (4) ST.R. 213 (Tri -Del)
m) Haldia Petrochemicals Lad. v. CCE 2006 (197) ELT. 97 (Tri- Del)
n) Siyaram Silk Mills Lid. v. CCL 2006 (195) ELT. 284 (Tri. - Mumbai)
o) Fibre Foils Ltd. v. CCE 2005 (190) ELT. 352 (Tri-Mumbai)
p) Ispat Industries Ltd v CCE, 2006 (199) ELT 509 (Tri-Mum)
q) NIRC Ltd v CCE, 2007 (209) ELT 22 (Tri-Del)
r) Chemicals & Fibres Ltd v CCE, 1988 (33) ELT 551 (Tri)
s) Avian Overseas Pvt Ltd v. Commr of C.Ex, Cus. & ST,BBSR-II, 2009 (15) STR 540 (Tri-Kol) 28
13. Shri Anoop Singh, Ld. Authorised Representative appeared and argued for the respondent. His submissions are as below:
A. The Ld. Adjudicating Authority has summarized the key facts and analyzed the documentary evidence relied upon by the revenue which finds mention at Para 21.2 of Pg 56 in the impugned order. The key documents relied by Revenue are as follows : -
i. Two Documents titled "lease deed" executed on 11.02.2010 and 19.07.2010 (Para 21.2/Pg 56) ii. Two Notarized Agreements dated 29.01.2010 and 17.05.2010 (Para 21.2/Pg 56) iii. Agreement titled Form of Joint Agreement for Quarrying and carrying away minor minerals by Lessee in Ryotwari Lands in which the Minerals belong to Government vide which Collector on behalf of Govt has granted a quarrying lease to the LESSEE Shri M Palanisamy. (Para 21.2/Pg 57) iv. Details of Profit and Loss Account of Shri M Palanisamy/Lessee showing lease rent payable by them at Pg 58 v. Details of ledger account of Shri M Palanisamy, the lessee at Pg 60 vi. Details of Income and Expenditure Statement of Trust showing receipts as RENT at Pg 62 vii. Details of Ledger Extract of Trust showing receipt of Lease Rent to the Trust at Pg 63 29 viii. Details of Balance Sheet and Income and Expenditure Account of the Trust showing lease rent received from Shri M Palanisamy at Pg 65 ix. TDS Certificates issued by ACIT authorizing Shri M.Palanisamy to pay RENT to TRUST without deduction of TDS at Para 21.4 of OIO/Pg 68 B. The appellant/trust has leased out certain lands to Shri Palanisamy by executing two lease deed documents dated 11.02.2010 and 19.06.2010, both titled 'Lease deed' and same were registered before Sub registrar. As per said documents, the appellant has leased several acres to lessee, Shri M Palanisamy and the annual lease rent of Rs.1000/- per acre was to be paid by lessee in advance at the beginning of the year. The appellant/trust and lessee had also executed notarized agreements dated 29.01.2010 and 17.05.2010 vide which Shri M Palanisamy has agreed to pay "Additional Lease Rent' to the tune of 75% of the receipts earned by sale of minerals mined on said parcel of land.
C. The Joint Agreement with Collector for quarrying and carrying away minor minerals by Lessee in Ryotwari lands in which minerals belong to the Government acknowledged appellant/trust as registered holder of land. Collector has granted a quarrying lease to the LESSEE Shri M. Palanisamy 30 and also allowed him to commence quarrying operations for Rough Stone in said land parcels.
D. Schedule 19 of PL account of Lessee at Pg 58 clearly captures the said amount as lease rent payable by Lessee. Further the Ledger account of Lessee at Pg 60 captures the said amount paid by Lessee to appellant as lease rent. The Income and Expenditure statement of Trust also captures said amount as Income from rent received by the appellant/Trust. The certificate issued by ACIT clearly establish the fact of receipt of rent by the appellant from Shri M. Palanisamy without deduction of TDS for the impugned periods. The adjudicating authority after discussing relevant provisions of the Income Tax Act has observed that the appellant/trust is entitled to avail TDS benefit only if the rent is derived from Immovable property or machinery or plant leased by the appellant and the exemption is not available if it is Business Income out of Mining profits or any other revenue sharing from business activities. The Mega Notification No. 25/2012-ST dated 20.06.2012 which exempts services by an entity registered under Section 12AA of the IT Act, 1961 by way of charitable activities from levy of Service Tax gives the definition of charitable activities under 2k, which on a plain reading indicates that it does not cover leasing of land for mining.
31E. From the analysis of the evidences the fact emerges that the appellant/trust has leased their lands, for the said activity of leasing have received lease rent and additional lease rent as consideration. Leasing is a service as per Section 65B(44) of the Finance Act and is more appropriately a declared service as per Section 66E(a) of the Act. The definition of renting is provided in Section 65B(44) would show that the appellant activity gets easily covered under the said definition. The definition states that renting means allowing, permitting or granting access, entry , occupation , use or any such facility, wholly or partially, in an immovable property , with or without the transfer of possession or control of the said immovable property and includes letting , leasing, licensing or other similar arrangements in respect of immovable property. The lease of immovable property finds mention in Section105 of Transfer of property Act,1882 and extracting the same, it is contended that the definition of leasing in Service Tax, rent in IT Act and lease in immovable property in transfer of immovable property Act are clear unambiguous and wide enough to cover the subject transactions of the appellant. That as per Section 66 D of the Act, the Negative List incorporates exclusion of renting or leasing activity fully in relation to agriculture whereas renting of immovable property services is a declared service as per Section 66E(a) of the Act. 32 F. That the contention of the appellant that it is a sale transaction liable to VAT and not Service Tax has already been addressed by the Adjudicating Authority at para 21.7 of pg. 74. There are two set of activities, namely, firstly, leasing of land by Appellant to lessee and secondly, mining and sale by Lessee. The Notice doesn't seek to demand service tax on mining and sale activities done by lessee. The predominant test and intention of agreement pertaining to first transaction is clear and same is nothing but a service of leasing out of land by Trust to lessee for consideration. Transaction of lease of land for consideration alone is subject matter of present proceedings. VAT payment argument on sale of minerals by lessee is immaterial for present demand. It is even not the case of Trust that they have sold land to Shri M Palanisamy and has paid VAT and revenue still seeks to demand ST on sale of land. The fact remains that the transaction in question is one of services provided by leasing of land to Shri M Palanisamy for consideration. Transaction of quarrying and sale Blue Metal /sand by Lessee is beyond the scope of Notice. In view of above undisputed facts, catena of judgments such as BSNL 2006 STR 161 SC and Imagic Creative 2008 STR 337 SC are clearly not applicable in the facts of the case. The same has been discussed by learned adjudicating authority at Para 21.7.1 to 21.7.4.
33G. That the contention of the Ld. Counsel that the Appellant/Trust is a manufacturer is factually incorrect and the submission that Shri M. Palanisamy was a hired labour is also factually incorrect. Further, shri M. Palanisamy was also not paying VAT on behalf of the Appellant and since the plea itself is on factually incorrect and legally unsustainable basis, therefore the case laws cited by the Ld. Counsel are distinguishable. H. That the contention of the Ld. Counsel that it is a revenue sharing agreement is not borne out from a plain reading of the Agreements dated 29.01.2010 and 17.05.2010 which will reveal that these are agreements for leasing of land by the appellant/trust for lease rent and there are no explicit terms of Joint venture for mining and sale of minerals. Plain reading of Contract at Pg 131 makes it clear that there was no profit- sharing arrangement in above agreements. The contention of the appellant that they were working as a joint venture and the notarized agreements indicates the said purpose and shows the revenue sharing agreements, is not a correct statement. The learned adjudicating authority has referred to the case of Faquir Chand Gulati vs Uppal Agencies 2008 STR 401 SC and New Horizons Ltd vs UoI 1995 SCC 478 where the nature of JV was considered. In the said proceedings, lordships have referred to various definition of JV occurring in American jurisprudence, definition in Corpus Juris Secundum, definition in Black Law Dictionary and have given certain illustrations also in certain different context of agreement between owner 34 of land and a builder. That JV is defined as an association formed to carry out a single business enterprise for profit. Each Joint Venturer must stand in the relation of Principal. No single party will determine whether the JV exists. It is a business undertaking of two or more persons engaged in a single defined project. From a plain reading of said Notarized Agreements, it is evident that such an agreement is not JV, as understood in law. There appears to be no contract for association of persons for an activity, namely, mining and selling of Blue Minerals. The fact that both the Parties have not considered said agreement as JV is also clear from the documents which shows that Shri M.Palanisamy has duly accounted such sums as rent. Further, neither the appellant nor the lessee has declared such agreement as JV for Mining and selling of minerals. There is no mention of shared responsibilities and risks, no mention of profit sharing in mining activities and no mention of risk or loss sharing in respect of quarrying, mining and selling of minerals and the fact remains that the appellant is a Trust registered for certain activities and not for Mining and Selling of minerals in land owned by the appellant.
I. There is no agreement to set up a Business Enterprise for profit and it appears that the appellant under various laws of the land cannot venture into such Mining activities and show business income accrued from mining and selling of minerals owned by 35 Govt, before various statutory authorities. The fact remains that the appellant is a Trust registered for certain activities and not for Mining and Selling of minerals in land which owned by them.
J. It is a fact that the appellant is registered under various Central and State Acts, including tax laws like IT Act and a Trust cannot take exemption from any or all kind of such Business Income from so called Revenue sharing agreements as it appears that the Law doesn't permits Trust to engage in such business activities, esp. Mining and Manufacturing activities.
K. The appellant has shown the receipts of such amount from LESSEE as RENT in Notarized Agreements. They have shown the receipts of such amount from LESSEE as RENT in their Balance Sheet and Income and Expenditure statements. The lessee has also shown such amount as RENT in their PL account and ledgers. It has been shown as RENT before Income Tax authorities also for purpose of claiming Tax exemption and issuance of TDS certificates. Moreover, a plain reading of agreement also makes it clear that it is not a contract for Mining and Sale of Minerals on Principal-to-Principal basis. There is no contract for joint business enterprise for mining and selling of minerals. Even before Collector, it is clear that the appellant Trust is only registered Holder of land and permission is being given to LESSEE for mining activities etc. 36 Appellant has no voice in the management of mining operations by LESSEE or in the administrative decision making related to day-to-day mining operations by LESSEE as per the Lease agreements. Thus, the case laws cited by the counsel have no application in the facts of the present case and that the learned adjudicating authority has also relied upon CST, Delhi vs Gourmet Food 2018 GSTL 348 affirmed by Apex Court to buttress his findings that there is no scope for interpreting the said agreement as Joint Venture agreement for mining and selling of Govt owned Minerals.
L. The extended period has been rightly invoked as the case of Revenue rests on detailed investigation, statements and documents gathered from Lessee and the appellant. Evidences such as the two Documents titled "lease deed" executed on 11.02.2010 and 19.07.2010; the two Notarized Agreements dated 29.01.2010 and 17.05.2010; the agreement titled Form of Joint Agreement for Quarrying and carrying away minor minerals by Lessee in Ryotwari Lands in which the Minerals belong to Government vide which Collector on behalf of Govt has granted a quarrying lease to the LESSEE Shri M Palanisamy; details of Profit and Loss Account of Shri M Palanisamy/Lessee showing lease rent payable by them ; details of ledger account of Shri M Palanisamy, the lessee; details of Income and Expenditure Statement of Trust showing receipts as RENT; details of Ledger Extract of Trust showing 37 receipt of Lease Rent to the Trust; details of Balance Sheet and Income and Expenditure Account of the Trust showing lease rent received from Shri M Palanisamy; TDS Certificates issued by ACIT authorizing Shri M.Palanisamy to pay RENT to TRUST without deduction of TDS etc. These were facts which were known to the Trust but were not known to Department. Therefore, the plea that when the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression is not legally sustainable, given the facts of the case.
M. That even though the appellant is a registered ST assessee for provision of renting of immovable property services and had been paying tax for renting of one of the Commercial premises, namely, SIV Towers and filing ST3 returns, the appellant has not declared to the Department at any stage about activities related to leasing of land for other commercial activities like mining and selling of minerals and receipt of additional lease rent from the Lessee. The fact of creation of separate set of agreements with Shri M Palanisamy to lease out lands for additional lease rent and the receipt of such lease rent was never disclosed to the Department. Only on the detailed investigation, especially at the end of LESSEE, the Revenue has come to such conclusion regarding taxability. Since the appellant was itself filing ST3 return and discharging tax on renting of immovable property services for other property, 38 namely, SIV Tower, which happens to be a commercial property, at this stage they cannot feign ignorance or claim that there was no deliberate suppression of facts or no Positive act etc. N. The appellant has been discharging service tax on the lease rent received from commercial property but have suppressed agreements and the facts regarding receipt of lease rent from property where mining operations are undertaken where the receipts of lease rent was in crores of rupees. Arguments advanced like said lease rent is nothing but a Business Income from Joint Venture only exposes the lack of bonafide on part of TRUST which is registered for charitable activities. The fact that all along both the LESSOR and LESSEE have accounted such receipts as RENT but have not disclosed the amounts related to such RENTS received from such taxable service in ST3 despite being registered for renting of immovable property services shows their lack of Bonafide. Argument that they believed that the RENTING of Property for a MINING activity is a charitable activity or a Manufacturing activity cannot be termed as a BONAFIDE Belief. Intention is clear from the facts of the case given that the Assessee will use word RENT in various agreements with the LESSEE; Assessee will use word RENT in various documents maintained by them; Assessee will use word RENT in statutory documents submitted before regulatory authorities also BUT the Assessee registered under 39 renting of immovable property services will not use word RENT while filing returns before Service Tax authorities under Heading Renting of Immovable Property Services or any other Taxable Service in Negative List era. In the instant case when the appellant has received additional lease Rent for consideration under a lease agreement; has used the said word RENT in agreements with LESSEE; has used the word RENT in statutory documents submitted before other authorities, has used the word RENT in various documents maintained by them ; there is no scope to conclude that they have not declared such receipts as RENT in ST3 return without the knowledge that the sums were indeed RENT only. Therefore, this is a fit case to invoke extended period.
14. We have heard the rival submissions at length. We have also carefully perused the appeal records and the case laws filed as relied upon.
15. The issues that arise for determination are whether the appellant has provided the taxable service of "renting of immovable property service" in respect of the lands that the appellant has leased out to Shri. M. Palanisamy (lessee) and consequently, whether the demand of service tax made on the appellant along with applicable interest and penalties as imposed, are tenable.
40
16. The statutory provisions of the Finance Act 1994 for the relevant period, germane to the examination of the issues herein, are reproduced below:
A) Section 66B. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve percent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.
B) Section 65B(44) "Service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include-
(a) an activity which constitutes merely,-
(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or
(ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or
(iii) a transaction in money or actionable claim;
(b) xxxxx
(c) xxxxx
C) Section 65B(41) "renting" means allowing, permitting or granting access, entry, occupation, use or any such facility, 41 wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property; D) Section 66D, which lists the negative list of services, stipulates in sub-clause (iv) of clause (d) of Section 66D, services relating to agriculture or agriculture produce by way of renting or leasing of agro machinery or vacant land with or without a structure incidental to its use.
E) Section 66E which stipulates what would constitute declared services, has specified under clause (a) "renting of immovable property.
F) Rule 5 of the Place of provision of services Rules, 2012, titled "Place of provision of services relating to immovable property", stipulates: "The place of provision of services provided directly in relation to an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located".42
G) It is also seen that the Mega Exemption Notification Nol.25/2012-ST dated 20-06-2012, at Sl.No.4 stipulates those services by an entity registered under Section 12AA of the Income Tax Act, 1961 by way of charitable activities are exempt from service tax. The definition of "charitable activities" given in paragraph2(k) of the said notification is as under:
"Charitable activities" means activities relating to -
(i) public health by way of -
(a) care or counselling of (i) terminally ill persons or persons with severe physical or mental disability, (ii) persons afflicted with HIV or AIDS, or (iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or
(b) public awareness of preventive health, family planning or prevention of HIV infection;
(ii) advancement of religion or spirituality;
(iii) advancement of educational programmes or skill development relating to,-
(a) abandoned, orphaned or homeless children;
(b) physically or mentally abused and traumatized persons;43
(c) prisoners; or
(d) persons over the age of 65 years residing in a rural area;
(iv) preservation of environment including watershed, forests and wildlife; or
(v) advancement of any other object of general public utility up to a value of,-
(a) eighteen lakh and seventy five thousand rupees for the year 2012-13 subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during 2011-12;
(b) twenty five lakh rupees in any other financial year subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during the preceding financial year;
17. Bearing the above in mind, we now analyze the documents that arise for consideration, which indisputably evidence as under:
A. Document titled "lease deed" executed on 11.02.2010 This document titled " Lease Deed" registered before the sub registrar, Madukkarai, Coimbatore, indicates, inter-alia, that the appellant has leased 22.68 acres of uncultivable land to Mr. M. Palanisamy on yearly lease of Rs.1000/- per acre amounting to Rs.22,680/- for the entire 22.68 acres. The 44 terms and conditions, inter-alia, are that the lease agreement is valid from 29.01.2010 for 5 (five )years. During these 5(five) years, for every one year the lease amount will be Rs.22,680/- which should be given by Mr. M. Palanisamy to the appellant by the beginning of every year. The appellant wholeheartedly agrees to Mr. M. Palanisamy taking charge over the land in maintaining the land and doing agriculture or any other work in the land and after the valid period the land must be handed over to the appellant. During the above said valid period of lease, Mr. M Palanisamy should not give the land for lease or for rent and if either party wishes to extend the lease duration, with mutual understanding they can extend it under their conditions. The property details of the 22.68 acres of vacant land specifying the survey numbers as situated at paalathurai village, Coimbatore South Taluk is also listed. B. Notarized Agreement dated 29-01-2010 This agreement between the appellant and Mr. M Palanisamy, inter-alia, states the factum of the property as detailed therein having been taken on lease by Mr. M. Palanisamy for five years from 29-01-2010 and the yearly lease amount of Rs.22,680/- . It goes on to state that as there are some sources and assets in the above mentioned property, apart from the above mentioned yearly lease amount to the appellant, Mr. Palanisamy assures that seventy five percent of the receipts will be paid to the appellant every month as additional lease 45 amount. It further states that the above said seventy five percent additional lease amount should be calculated and paid by the end of every six months, failure to do so attracting interest calculated at one percent per month and be paid once in every six months. The agreement provides that if Mr. M. Palanisamy wishes to extend the duration and validity of the lease, it can be informed to the appellant and with the decision from the board of the appellant, it can be extended. The agreement also requires Mr. M. Palanisamy to keep the property without causing any problem and if something goes wrong, Mr. Palanisamy promises to get it cleared at his own risk and cost.
C. Document titled "lease deed" executed on 19.07.2010 This document titled " Lease Deed" registered before the sub registrar, Madukkarai, Coimbatore, indicates, inter-alia, that the appellant has leased 14.86acres of uncultivable land to Mr. M. Palanisamy on yearly lease of Rs.1000/- per acre amounting to Rs.14,860/- for the entire 14.86 acres. The terms and conditions, inter-alia, are that the lease agreement is valid from 17.05.2010 for 5 (five) years. During these 5(five) years, for every one year the lease amount will be Rs. 14,860/- which should be given by Mr. M. Palanisamy to the appellant by the beginning of every year. The appellant wholeheartedly agrees to Mr. M. Palanisamy taking charge over the land in maintaining the land and doing agriculture or any other work 46 in the land and after the valid period the land must be handed over to the appellant. During the above said valid period of lease, Mr. M Palanisamy should not give the land for lease or for rent and if either party wishes to extend the lease duration, with mutual understanding they can extend it under their conditions. The property details of the 14.86 acres of vacant land specifying the survey numbers and that the land is in the boundaries of Paalathurai Village Administration is also stated. D. Notarized Agreement dated 29-01-2010 This agreement between the appellant and Mr. M Palanisamy, inter-alia, states the factum of the property as detailed therein having been taken on lease by Mr. M. Palanisamy for five years from 17-05-2010 and the yearly lease amount of Rs.14,860/- . It goes on to state that as there are some sources and assets in the above mentioned property, apart from the above mentioned yearly lease amount to the appellant, Mr. Palanisamy assures that seventy five percent of the receipts will be paid to the appellant every month as additional lease amount. It further states that the above said seventy five percent additional lease amount should be calculated and paid by the end of every six months, failure to do so attracting interest calculated at one percent per month and be paid once in every six months. The agreement provides that if Mr. M. Palanisamy wishes to extend the duration and validity of the lease, it can be informed to the appellant and with the decision 47 from the board of the appellant, it can be extended. The agreement also requires Mr. M. Palanisamy to keep the property without causing any problem and if something goes wrong, Mr. Palanisamy promises to get it cleared at his own risk and cost.
E. JOINT AGREEMENT FOR QUARRYING AND CARRYING AWAY MINOR MINERALS BY LESSEES IN RYOTWARI LANDS IN WHICH THE MINERALS BELONG TO GOVERNMENT The title reflects the purpose of the agreement entered into as that for quarrying and carrying away minor minerals by Lessees, which in this case is Mr. M. Palanisamy, and which minerals in such ryotwari lands belong to the Government. The agreement made on 27th July 2010 states that the appellant is the registered holder of the lands described in the schedule and that the appellants intended to lease out to the lessee, who is identified as M. Palanisamy in the agreement, the said lands for the purpose of quarrying rough stone in the said lands and to deposit mining waste in the said lands. With this intent the appellants have lodged with the Collector the lease and accurate map or sketch of the said lands. It further states that the lessee or tenant has made application to the collector of Coimbatore District seeking grant of quarrying lease for quarrying Rough Stone in the said lands and that the said Collector on behalf of the Government has granted a quarrying 48 lease to the lessee or tenant of the registered holder for the purpose applied for. Such permission was contingent on the registered holder and the lessee entering into the agreement contained therein. It is the lessee who has deposited Rs.5000/- as security for the due performance of the agreement or damage which may be incurred. The conditions specified in this agreement stipulate that the Lessee is to maintain the leased land by marking the boundaries with coloured stone markings during the entire lease period. The lessee on his own charge shall create roads to and from the quarry. For the permitted stones cleared from the quarry seigniorage fee is to be paid as specified in Annexure-2 of Tamil Nadu Minor Mineral Rules, 1959 and the lessee shall also pay according to the changes in the seigniorage fee without any objection. The lessee is to undertake quarry work in compliance to the above conditions in the contract agreement and as per Tamil Nadu Minor Mineral Rules, 1959.
In this connection, we note that Seigniorage Fee is equivalent to Royalty as per the aforesaid Mineral Rules, 1959 and is paid respect of actual quantity of minerals removed or consumed at the rates prescribed from time to time.
18. It also remains undisputed that the yearly/annual lease amounts as well as the additional lease amounts stood reflected in the books of accounts of both, the appellant and Shri. M. Palanisamy, as reproduced in the impugned OIO, and perusal of which indicates the following facts: 49
a) For example, for the year ending 31.03.2013, under heading Schedule 19 titled "RENT AND LEASE RENT", of the Details to Profit and Loss Account of Shri M Palanisamy/Lessee, shows as a separate item entry, the lease rent payable for the lands taken on lease from the appellant.
b) Ledger account of Shri. M Palanisamy/Lessee shows the lease rent for the lands paid to the appellant.
c) The Income and Expenditure Statement of the Appellant shows the lease rent received as income under the entry rent received.
d) The ledger extract of the ledger account of the Trust has shown under the heading "lease rent (mining land) received from M. Palanisamy" the lease rent for the said vacant lands received from the lessee, paid on various dates.
e) The Schedules to the Balance Sheet and Income & Expenditure account of the Appellant, for example, as on 31.03.2014, under heading Schedule 12 titled "Lease Rent received", shows as a separate item entry " Lease Rent (mining land) received from M. Palanisamy".
f) TDS Certificate No: 0312DD149B dated 24-Jul-12 issued by Assistant Commissioner of Income Tax, TDS Circle, Coimbatore addressed to MARAPPA GOVNDER PALANISAMY, holder of TAN CMBM04060A, authorizes the lessee to pay or credit Rent upto Rs.150,00,00,000/- (one hundred and fifty crores), after deducting income tax at the rate of 0% to the account of Sree Vijayalakshmi Charitable Trust, PAN 50 AADTS0942A, over whom the said officer has jurisdiction to issue of this certificate. The certificate is stated s valid for above PAN holder for payments or credit by whatever name called whichever is earlier from 03-JUL-12 to 31-MARCH-13.
There is yet another identical TDS Certificate No.0313DW657E dated 07-MAY-13 addressed to the Lessee to pay or credit Rent upto the same amount as aforementioned to the account of the appellant from 10-APR-13 to 31-MAR-14, issued by Deputy Commissioner of Income Tax, TDS Circle -II (i/c), Chennai. Both these TDS certificates evidence authorization by the concerned Income Tax Officer authorizing the lessee to pay rent to the appellant without deduction of TDS upto Rs. One hundred and fifty crores.
19. When we examine the activity of the appellant on the basis of the above cited statutory provisions, and documentary evidence, what emanates clearly is that the appellant has leased 22.68 acres of vacant land owned by it to Shri. M. Palanisamy, the lessee by way of a registered lease deed dated 11th February 2010 with the lease agreement being valid from 29.01.2010 for a period of five years and a yearly lease amount of Rs.22,680/- to be paid at the beginning of every year. On 29.01.2010 itself, the appellant enters into a separate notarized agreement in respect of the same 22.68 acres of vacant land owned by it, evidencing the agreement that as there are some sources and assets in the above-mentioned property, apart from the above mentioned yearly lease amount to the appellant, Mr. Palanisamy assures 51 that seventy five percent of the receipts will be paid to the appellant every month as additional lease amount. It is also pertinent that the said notarized agreement of 29.01.2010 also stipulates that that if Mr. M. Palanisamy wishes to extend the duration and validity of the lease, it can be informed to the appellant and with the decision from the board of the appellant, it can be extended. This, to us, clearly indicates that the parties to the agreement are ad idem that the nature of the agreement is that of a lease agreement, and thus the "additional lease amount" specified therein as payable by the lessee to the appellant, is nothing other than what it literally reads to be, namely a lease amount for the said land that is being paid additionally by the lessee to the appellant. It is also indicated that the said payment of additional lease amount is being paid in addition to the yearly lease amount. The quantification of the lease amount in terms of the receipts of the lessee, and as seventy five percent of the receipts, cannot and does not divest the said additional lease amount of its intrinsic character of rent, when the said additional lease amount is paid by the lessee to the appellant. Likewise, in respect of the 14.86 acres of vacant land owned by the appellant also, the appellant has leased the said land to the lessee Shri. M. Palanisamy, by way of a registered lease deed dated 19th July 2010, with the lease agreement being valid from 17.05.2010 for a period of five years and a yearly lease amount of Rs.14,8600/- to be paid at the beginning of every year. In respect of this 14.86 acres of land too, the appellant has on 17.05.2010 itself, in the afore narrated manner, entered into a separate notarized agreement, evidencing the meeting of minds between the appellant and Shri. M. Palanisamy that, as there are 52 some sources and assets in the above-mentioned property, apart from the above mentioned yearly lease amount to the appellant, Mr. Palanisamy will be required to pay seventy five percent of the receipts to the appellant every month as additional lease amount. In this case also, our aforesaid finding equally applies, namely that the quantification of the lease amount in terms of the receipts of the lessee, and as seventy five percent of the receipts, cannot and does not divest the said additional lease amount of its character of rent, when the said additional lease amount is paid by Mr. Palanisamy to the appellant.
20. Further, we note that the agreement executed by the appellant along with the lessee Mr. Palanisamy and the District Collector, Coimbatore is at the behest of the mandate of the Government and the title reflects the purpose of the agreement entered into, namely, as that for quarrying and carrying away minor minerals by Lessees, which in this case is Mr. M. Palanisamy, and which minerals in such ryotwari lands belong to the Government. This agreement too bears out the fact situation that the appellants are the registered holders of the land which the appellants have leased out to the lessee Mr. Palanisamy and it is to Mr. Palanisamy, pursuant to his application to the collector of Coimbatore District seeking grant of quarrying lease for quarrying Rough Stone in the said lands, that the said Collector on behalf of the Government has granted a quarrying lease to the lessee for the purpose applied for.
53
21. It is a settled principle of contract interpretation that where the transaction is not the subject of one document, but several, which refer to each other, or a reading of all, describe the entire contract then it is open to the court to consider all of them together. This principle was stated in S. Chattantha Karavalar v The Central Bank of India & Ors, (1965) 3 SCR 318, wherein the Honourable Apex Court has held:
"The principle is well-established that if the transaction is contained in more than one document between the same parties they must be read and interpreted together and they have the same legal effect for all purposes as if they are one document."
22. Thus, a reading of the two lease deeds, along with the two notarized agreements as well as the joint agreement entered into by the appellant, lessee and the Collector, Coimbatore, makes it clear beyond a scintilla of doubt that the effect of all the terms of these agreements reveal that the true purport and intention of the appellant and Mr. M. Palanisamy as contracting parties is that the appellant as lessor has leased the vacant lands out to Mr. M. Palanisamy, the lessee, for which the appellant receives a yearly lease amount and an additional lease amount as rent for such leasing of the vacant lands and it is for the lessee to carry out the activity of quarrying rough stone for which purpose it made and obtained permission from the District Collector Coimbatore. It is also evident that it is the lessee's responsibility to keep the property without causing any problem and if something goes wrong, the lessee must get it cleared at his own risk and cost. Further, the joint agreement with the District Collector, the appellant and the lessee also evidences that it is the lessee who has deposited Rs.5000/- as security 54 for the due performance of the agreement or damage which may be incurred and it is the lessee who has to pay the seigniorage fee as specified in Annexure-2 of Tamil Nadu Minor Mineral Rules, 1959 when the permitted stones are cleared from the quarry and the lessee shall also pay according to the changes in the seigniorage fee without any objection. The lessee is also to undertake quarry work in compliance to the above conditions in the contract agreement and as per Tamil Nadu Minor Mineral Rules, 1959.
23. At this juncture, we propose to deal with the contentions advanced by the counsel for the appellant. It has been contended that the nature of the transaction as borne out from the agreements is for sharing of revenue earned from mining of metals and the transaction alleged as 'Renting of Immovable Property' is a joint venture (JV), undertaken for mutual profit. It is further argued that and it is settled that co-venturers in a joint venture are not be liable to Service Tax on a joint venture in light of the Doctrine of mutuality. In revenue-sharing arrangements, the two contracting parties act on principal to principal basis and one does not provide service to another. Reliance is placed on Department Circular No.109/3/2009-ST dated 23.02.2009 at Annexure H for the contention that revenue sharing agreements where contracting parties act on a principal to principal basis will not be liable to tax.
24. Given our analysis of the agreements stated supra, we find that the said contention is contrary to what comes out from the said agreements. The agreements nowhere reflects that it is intended as a 55 revenue sharing agreement. We also note that the adjudicating authority has dealt with this contention in paragraphs 21.8.1 to 21.8.8 in extenso, but we are not reproducing the same herein to avoid prolixity. The learned adjudicating authority has referred to the case of Faquir Chand Gulati vs Uppal Agencies 2008 STR 401 SC where the nature of JV was considered and references made to various definition of JV occurring in American jurisprudence, definition in Corpus Juris Secundum, definition in Black Law Dictionary and has held that from the agreements it is not forthcoming that the parties intended it to be a joint venture. We also find from the documents that both the appellant as the lessor, and shri M. Palanisamy as the lessee, have not considered the agreements to constitute a JV. There is complete absence of mention of any shared responsibilities and risks, rather it is the lessee who has been saddled with the entire risks associated with the quarrying activities. The agreements also do not reflect any loss sharing or is there a mention of profit sharing in mining activities. We concur with the findings of the adjudicating authority in this regard.
25. We find that the appellant has in support of its aforesaid contentions relied on the following decisions:
a) New Horizons Ltd vs Union of India, (1995) 1 SCC 478 (Annexure D)
b) Faqir Chand Gulati vs Uppal Agencies Pvt. Ltd., 2008 (12) STR 401 (SC) (Annexure E)
c) Commissioner vs. Mormugao Port Trust-2018 (19) GSTL J118 (S.C) (Annexure F) 56
d) ACL Mobile Ltd. vs. CCE, Delhi 2019 (20) GSTL 362 (Tri Del.) (Annexure G)
e) B.G. Exploration & Production India Ltd. vs COMMISSIONER OF CGST & CX, NAVI MUMBAI, 2022 (64) G.S.T.L. 578 (Tri.
Mumbai) (Annexure I)
f) B.G. Exploration & Production India Ltd. vs COMMISSIONER OF CGST & CX, NAVI MUMBAI, 2022 (63) G.S.T.L. 351 (Tri. Mumbai) (Annexure J)
g) Commissioner of Service Tax vs Inox Leisure Ltd, 2022 (61) GSTL 342 (SC) (Annexure K)
h) Inox Leisure Ltd. vs Commissioner of Service Tax, Hyderabad , 2022 (60) GSTL 326 (Tri.-Hyd.) (Annexure L)
i) Sir Ganga Ram Hospital vs Commissioner of Service Tax, New Delhi, 2020 (43) GSTL 390 (Tri.- Del.) (Annexure M)
j) Niraj Prasad vs Commissioner of C. Ex. & S.T., Kanpur 2020 (38) GSTL 78 (Tri.-All.) (Annexure N)
k) Commr. of S.T., Delhi-III vs Bharuch Dahej Railway Company Ltd, 2020 (34) GSTL 565 (Tri.- Del.) (Annexure O)
l) KPH Dream Cricket Pvt. Ltd. vs Commr. of C. Ex. & S.T., Chandigarh-I,2020 (34) GSTL 456 (Tri.-Chan.) (Annexure P)
m) Commr. of C. Ex. & Cus., Hyderabad-III vs Ushakiron Television , 2019 (24) GSTL 267 (Tri.-Hyd.) (Annexure Q)
n) Ambience Hospitality P. Ltd. vs Commr. of C. Ex., Delhi-IV, 2019 (21) GSTL 400 (Tri.-Del.) (Annexure R)
o) Sir Ganga Ram Hospital vs Commr. of Central Excise, Delhi-I, 2018 (11) GSTL 427 (Tri.-Del.) (Annexure S) 57
p) PVS Multiplex India Pvt. Ltd. vs Commr. of C. Ex., Meerut- I,2018 (10) GSTL 496 (Tri.-All.) (Annexure T)
q) Times Internet Ltd. vs Commr. of C. Ex (Adj.), New Delhi , 2017 (4) GSTL 33 (Tri.-Del.) (Annexure U)
r) Mormugao Port Trust vs Commr. of Cus., C. Ex. & S.T., GOA, 2017 (48) STR 69 (Tri.-Mumbai) (Annexure V)
s) Centre for development of Advance Computing vs C.C.E. Pune, 2016 (41) STR 208 (Tri.-Mumbai) (Annexure W)
t) AB Motions Pvt. Ltd. vs Commr. of C.E. & ST., Ludhiana, 2019 (4) TMI 2043-Cestat Chandigarh (Annexure X) u) Commr. of C.E & ST, GOA vs Goa Golf Club Pvt. Ltd, 2023 (5) TMI 1026-Cestat Mumbai (Annexure Y)
v) Meghraj Cinema vs Commr. of ST, Mumbai-VII, 2024 (8) TMI 1053-Cestat Mumbai (Annexure Z) w) Commr. Of CE & ST Ludhiana vs AB Motions Pvt. Ltd, 2024 (5) TMI 1061-SC Order (Annexure ZZ)
x) Hardy Exploration and Production (India) Inc. vs Commr. of GST & CE, Chennai, 2024 (1) TMI 456-Cestat Chennai(Annexure ZZZ) y) Spencer International Hotels Ltd. vs Commr. of GST & CE, Chennai Service Tax, 2023 (6) TMI 999-Cestat Chennai (Annexure a)
26. We find that the reliance placed on Marmagoa Port Trust v CCE, Goa, 2017 (48) STR 69 Mum, is pertaining to two entities that had come together with the objective of earning revenue by jointly rendering port 58 services whereas in the appellant's case there exists no agreement between the appellant and the lessee indicating that they have come together as a business venture for mining and selling of minerals owned by Government. Moreover, the appellant in the instant case is a Charitable Trust and not a Port Trust engaged in Business activities. In the decision in B.G. Exploration & Production India Ltd. vs COMMISSIONER OF CGST & CX, NAVI MUMBAI, 2022 (64) G.S.T.L. 578 (Tri. Mumbai) (Annexure I), the contracts therein were broadly divided into three phases and Enron Oil, Gas India Ltd, RIL and ONGC entered into a joint operating agreement to define their respective rights, duties and obligations with respect to their operations under the contract. In terms of the agreement, liabilities incurred by any holder were required to be borne by all the holders in accordance with the ratio of their performing their obligations. The facts of this case are clearly distinguishable from the facts of the cited case law. Likewise, we also find that not only are the decisions relied on by the appellant in this context distinguishable from the facts and circumstances of this case, but the circular No.109/3/2009-ST dated 23-02-2009 at annexure H of the compilation of case laws and circulars submitted as relied on also, which is on the subject of service tax on movie theatres, has no relevance or applicability in the facts of this case.
27. In as much as the adjudicating authority has categorically controverted the appellant's contentions regarding the plea that the agreements constituted a JV, by detailing the requirements that ought to exist in order to be considered a JV, the appellant has in the grounds 59 of appeal listed considerations which the appellant claim have been duly factored and jointly undertaken by the parties and that the profits have been thereby shared in a fixed ratio depending on the quantum of risks borne by the parties which would show that there exists joint control and responsibility. We are afraid, that such pleas, howsoever imaginative, do not translate into factors that evidence joint control and responsibility when there is nothing stated on record or borne out from any agreement shown as entered into by the parties reflecting that such considerations have been adequately expressed, considered and agreed upon and shown as determinative of any profit sharing that has been arrived at consequent to such an understanding. On the contrary, all that the agreements reflect is that the appellants have leased the land to the lessee for a yearly lease amount and an additional lease amount. We are of the firm view that quantification of the lease amount in terms of the receipts of the lessee, and as seventy five percent of the receipts, cannot and does not divest the said additional lease amount of its intrinsic character of rent, when the said additional lease amount is paid by the lessee to the appellant in terms of an agreement which characterizes the transaction between the parties not only as lease of land detailed therein but also stipulates further that if Mr. M. Palanisamy (the lessee) wishes to extend the duration and validity of the lease, it can be informed to the appellant and with the decision from the board of the appellant, it can be extended. Further, all subsequent documents including the certificate for exemption from payment of TDS on rent reveal that the transaction has only been presented as renting of immovable property before statutory authorities such as Income Tax 60 Authorities as well as State Authorities such as the District Collector of Coimbatore. Evidently it is such presentation of facts that has been reflected as such in the joint agreement entered into by the appellant, the lessee and the District Collector wherein it is indicated that appellant is the owner and lessor of the land which is being leased out to the lessee Shri. M. Palanisamy.
28. The appellant has also contended that tax liability cannot be imposed solely based on nomenclature and accounting treatment again contending that the transaction is that of revenue sharing. From our discussions above, the contention of the appellant that it is a revenue sharing agreement has been shown to be without any basis. Further the contention of the appellant that liability is solely on the nomenclature and accounting treatment is incorrect. Rather the liability has arisen from the nature of transaction as reflected from the agreements entered into by the appellant and Shri. M. Palanisamy being one of the appellant leasing vacant lands to the lessee . What the documents evidence is that, contrary to the stand now taken by the appellant, the contemporaneous records reflect that the appellant itself has characterized the receipts from lessee as "additional lease amount" in the Notarized Agreements. The fact that the appellant has shown the receipts of such additional lease amount received from the lessee as rent in their Balance Sheet and Income and Expenditure statements is evidence enough that at the relevant point in time the appellant too has considered the same as rent receipts. The lessee has also mirrored such understanding by indicating these amounts as rent amounts paid to the 61 appellant in their ledgers as well as their profit and loss account. Both the lessor and lessee have depicted the said additional lease amounts paid by the lessee to the appellant as rent, before Income Tax authorities for purpose of claiming exemption from payment of TDS and for obtaining certificates in this regard from the jurisdictional income tax authorities. On a plain reading of the agreements, nowhere is it forthcoming that the appellant and the lessee have understood the said agreements being entered into as contracts for mining and sale of minerals on a principal-to-principal basis. The agreements do not state that they are a contract for joint business enterprise of mining and selling of minerals. The appellant Trust has averred before the Collector, Coimbatore that it is only the registered Holder of land and it is Shri. M. Palanisamy as the Lessee who has sought permission for quarrying rough stones. The agreement nowhere reflects that the appellant has a say in the management of mining operations by the lessee or in the administrative decision making related to day-to-day mining operations by the lessee when it carries out the mining activities. Therefore, the case laws relied upon by the appellant are inapplicable in the facts and circumstances of this case aforementioned as the facts therein are distinguishable.
29. The appellant has also contended that it is a sale transaction liable to VAT and not Service Tax. It is pertinent to note that there are two activities that occur in sequence. First is the leasing of the vacant lands by the appellant to the lessee. It is only consequent to such leasing that the next activity, namely, quarrying of the rough stones/blue minerals 62 are carried out by the lessee and thereafter its sale by the lessee. The first transaction or activity that has occurred, namely the leasing of the vacant lands by the appellant to the lessee is what is sought to be taxed as service. The transaction of lease of land for consideration alone is the subject matter of present proceedings. The VAT payment on sale of minerals by lessee is the lessee fulfilling its tax obligations under the State VAT laws and that is irrelevant in so far as the demand raised on the appellant is concerned. We note that the adjudicating authority has extensively dealt with this contention in paragraphs 21.7.1 to 21.7.4 of the OIO and has controverted the same. We concur with findings of the adjudicating authority which are in consonance with our views stated above. Therefore, this attempt to conflate two transactions and pass it off as a single transaction exigible to VAT, is specious and devoid of merits. We find that the case laws relied upon by the appellant have no application in the aforesaid facts of this case.
30. The contention of the appellant that the receipts from the lessee cannot be characterized as a "consideration" for service also hinges on its contention that it is a revenue sharing agreement that the appellant has entered into with the lessee. For the reasons already elaborated supra, the contention of the appellant that it is a revenue sharing agreement is found to be misconceived and thus the aforesaid contention that the receipts of additional lease amounts, from the lessee cannot be characterized as a consideration too is liable to be dismissed as unacceptable. The case laws relied on in this regard are different from the facts of this case and unlike the said cases, the appellant herein is 63 engaged in the specific activity of renting of immovable property for consideration and thereby there does exist a quid pro quo between the appellant lessor and shri. M. Palanisamy, the lessee.
31. The appellant has taken a contention that in this case the appellant is the manufacturer and Shri. M. Palanisamy is the hired labour and as a manufacturer the appellant is manufacturing/producing stones/gravel/sand etc which are chargeable to excise duty/exempted goods and thus the question of levying service tax on the goods manufactured or produced will not arise. We find that the present demand is on the activity of the appellant which is only the leasing of vacant lands to the lessee. The permission granted by the Collector, Coimbatore is on an application for quarrying by the lessee and it is the lessee who is carrying out the quarrying of rough stones. The show cause notices neither has a proposal to impose any service tax on the mining operations nor does the impugned OIO propose the same. Thus, such contentions raised are not only wholly irrelevant but also do not come out from any of the documents in the appeal records. We dismiss the same as being utterly baseless. For the said reasons, the case law cited by the appellant being distinguishable in the facts and circumstances stated therein has no application in this case.
32. Having addressed the elaborate, albeit divergent contentions of the appellant on merit's which we have found to be devoid of merits and unacceptable, when we analyze the aforesaid transaction between the appellant and the lessee, in terms of the statutory provisions of the 64 Finance Act, 1994 reproduced above, it can be seen that as per Section 65B(44), "Service" means any activity carried out by a person for another for consideration, and includes a declared service; Section 66E(a) stipulates "renting of immovable property" as a declared service; and Section 65B(41) "renting" means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property. Thus, the leasing of the vacant lands by the appellant to the lessee Mr. M. Palanisamy, comes within the ambit of the definition of "renting" as defined in Section 65B(41). Since the term "activity" means something that a person does, the leasing of vacant lands done by the appellant is an "activity" being carried out by the appellant. Since the appellant is leasing the vacant lands to Mr. Palanisamy, it becomes an activity by the appellant for another person, namely Mr. Palanisamy. Again, by the said activity of leasing of vacant lands the appellant is receiving annual lease amount and additional lease amount in terms of the aforementioned agreements, the said amounts so received are the consideration received by the appellant for such activity of leasing of vacant lands. Therefore, such activity of leasing of vacant lands by the appellant to Mr. Palanisamy, for receipt of annual lease amount and additional lease amount, qualifies as any activity carried out by a person for another for consideration, and thus comes within the ambit of the definition of "service." The vacant lands being immovable property, such leasing of vacant lands by the appellant to Mr. Palanisamy fall more 65 specifically under "renting of immovable property" and is thus a declared service under Section 66E(a).
33. Further, since the negative list of services given in Section 66D
(d) (iv), in so far as renting is concerned, lists only services relating to agriculture or agriculture produce by way of renting , it is evident that the "renting of immovable property" carried out by the appellant in respect of the vacant lands leased out to Mr. M Palanisamy does not come under the negative list of services. Again, the activity of "renting of immovable property" being one which is not specified under the definition of "charitable activities" given in paragraph 2(k) of the Mega Exemption Notification No.25/2012-ST dated 20-06-2012, the exemption from service tax provided at Sl.No.4 thereof to those services by an entity registered under Section 12AA of the Income Tax Act, 1961 by way of charitable activities, are not available to the appellant. However, since Rule 5 of the Place of provision of services Rules, 2012, stipulates that the place of provision of services relating to immovable property, for grant of right to use immovable property, shall be the place where the immovable property is located, and such immovable property evidently being in the taxable territory of India, the said "renting of immovable property" carried out by the appellant, being a service, other than those services specified in the negative list, provided in the taxable territory by one person to another, that is by the appellant to Mr. M. Palanisamy, squarely attracts the charge of service tax under Section 66B of the Finance Act, 1994 and is leviable to service tax at the specified rate. We find that the adjudicating authority has confirmed the 66 demand giving extensive and well-reasoned findings on all aspects and contentions raised by the appellant. We therefore hold that the demand of service tax confirmed by the adjudicating authority in the impugned order in original is correct and tenable in law.
34. The appellant has also taken a plea that the extended period of limitation ought not to have been invoked in the first SCN contending that the transaction is itself outside the Service tax net, the entire demand has been sourced from the documents produced by the Appellant, there was no suppression with an intent to evade payment of tax, the issue involves statutory interpretation, having travelled up to the Hon'ble Supreme Court, suppression cannot be alleged in a situation where the Department was aware of the Appellant's activities and that the District Collector vouched the entire activity by signing the APPENDIX V as a representative of Govt of Tamil Nadu.
35. We find the contention that the transaction is itself outside the service tax net is devoid of merits and that cannot be countenanced as an argument against invoking of extended period of limitation. We are also unable to concur with their contention that there has been no suppression. We find that the appellant is registered for provision of renting of immovable property services as a service tax provider. The appellant is also paying service tax for renting of a Commercial premise, namely, SIV Towers and filing ST3 returns. Thus, the provision of law relating to renting of immovable property is not alien to the appellant. Yet, the appellant has not declared to the Department at any stage 67 about activities related to leasing of vacant land to the lessee Shri. M. Palanisamy and receipt of additional lease amounts which the appellant has also characterized as rent received from the Lessee. The fact of creation of separate set of agreements with Shri M Palanisamy to lease out lands for additional lease rent is a fact that is within the exclusive knowledge of the appellant. The receipt of such lease rent was never disclosed to the Department. Only on a detailed investigation, particularly with Shri. M. Palanisamy that the activities of the appellant of leasing of vacant lands to Shri. M. Palanisamy came to the knowledge of the Department. Thus, the contention of the appellant that when facts are known to both parties, suppression cannot be alleged is without any merits. Since the appellant was a service provider specifically registered for the service of renting of immovable property and filing ST3 return and discharging tax on renting of immovable property services for another property, namely, SIV Tower, which is a commercial property, it does not lie in the teeth of the appellant to now say that it did not know the provision of law or that it was unaware of its liability. We find that the deliberate act of withholding the fact of receipt of additional lease amount is the positive act of suppression that the appellant has indulged in and such act coupled with the appellant's failure to declare the receipt of additional lease amount and pay the service tax due thereon while declaring only the remaining rent amount collected for the relevant period of the return and paying tax only to that limited extent, is clearly tantamount to willful suppression and misstatement of facts with intent to evade payment of duty, especially when such additional lease amount that the 68 appellant has received runs into crores of rupees. We therefore hold that the extended period of limitation has been rightly invoked in respect of the first show cause notice. We notice that the adjudicating authority has also given elaborate reasoning in paragraphs 22.1 to 22.5 in respect of the contentions raised by the appellant on invocation of the extended period which are in consonance with our aforesaid findings. Therefore, the case laws relied upon by the appellant are clearly distinguishable from the facts and circumstances of this case.
36. The appellant has also contested the imposition of penalty stating that the Appellant was under a bona fide belief that no service tax was liable to be paid and that the issue involves interpretation of law and since the appellant had reasonable cause to believe that no service tax was liable to be paid, the benefit of Section 80 must be extended to the instant case. We are unable to concur with the said contentions. We have already held above that even though the appellant has been discharging service tax on the lease rent received from commercial property yet it has chosen to suppress the fact of having entered into agreements and the fact of receipt of additional lease amounts from property leased out to Shri M. Palanisamy, with such additional lease amounts being in crores of rupees. Belief, in order to constitute Bonafide belief should have a basis stemming from what an ordinary prudent man would consider to be reasonable. Any belief or blind belief cannot be equated with Bonafide belief. The appellant's contention that the appellant was a manufacturer and Shri. M. Palanisamy was paid labour or that the appellant and Shri. M. Palanisamy had entered into a Joint 69 Venture and that the agreements reflected revenue sharing on a principal-to-principal basis are merely specious arguments sans any basis whatsoever when the very wordings of the document nowhere reflects any reasonable basis for such interpretation. Thus, such contentions belie the plea of Bonafide belief. The indisputable fact is that the appellants are acquainted with the provisions of law relating to renting of immovable property being an assessee registered for providing precisely the said service and therefore cannot feign ignorance of law on this aspect. It is an indisputable fact that the agreements entered into indicate that the lessee has to pay additional lease amounts. It is also incontrovertible that the appellant has secured exemption from its jurisdictional income tax authorities that allow the lessee to pay such additional lease amount as rent without any tax deduction at source. It is also undeniable that the appellant has characterized these receipts of additional lease amounts as rent in its books of accounts and balance sheet. Yet, when the appellant who is registered under renting of immovable property services has not offered these additional lease amounts to tax while filing returns before Service Tax authorities under Heading Renting of Immovable Property Services cannot claim that it did not do so on a Bonafide belief. In fact, there is no rationale, rhyme or reason for the appellant not to declare such additional lease amounts as rent in the ST-3 returns and pay tax thereon. Thus, neither was there any scope to consider the matter as an issue involving interpretation nor was there any scope to claim that there was a reasonable cause for not discharging the service tax dues on such additional lease amounts received by the appellant for such 70 renting of vacant lands. We therefore do not find this a fit case to invoke section 80 and extend the benefits thereof. The case laws cited by the appellant in this regard, given our findings supra, are distinguishable from the facts and circumstances of this case.
37. We also find that the adjudicating authority has given valid reasons in paragraph 28.1 to 28.3 for the penalties imposed. We find that the adjudicating authority, noticing that the details of the transactions and that of the lease rent payments were available in the financial records, have extended the benefit of reduced penalty of fifty percent of the service tax not paid as has been provided for in such circumstances under the first proviso to section 78 (1) of the Finance Act, 1994 in respect of the penalty imposed with respect to the first show cause notice. As regards the second show cause notice, the adjudicating authority has imposed a penalty under Section 76 of the Finance Act, 1994 which stipulates that the penalty shall not exceed 50% of the service tax payable. It is also pertinent that this is not the case of invoking Section 78 and 76 simultaneously, as there are two SCNs spanning two different periods and the separate penalties under Section 78 and Section 76 have been invoked for the different periods. We find that the penalty imposed is within the limits prescribed. The penalty imposed under Section 77(2) of the Finance Act is also commensurate with the violations found.
38. The appellant had in the written submissions taken a plea that in case any deficiency is noticed under income tax it is responsibility of the 71 central excise authorities to bring it the notice of the income tax authorities for remedial action but in this case the deficiency happened under IT Act is being misused to levy the service tax. We find such glib submissions to be disingenuous. The exemption from income tax is allowed only in respect of income from immovable properties and not any business incomes. However, when a transaction, represented as leasing of vacant lands with yearly lease amount and additional lease amount being shown as receipts by the lessor appellant from the lessee and such understanding reflected not only in the agreements executed but also in the manner such income has been characterized and dealt with for all purposes in their books of accounts; when the transactions are also represented as leasing of vacant lands not only to the income tax authorities but also to the state authorities so as to enable the lessee to exclusively apply and secure permission for quarrying, we find no reason then for us to go behind the literal meaning of the agreements as depicted, in search of a contrived revenue sharing agreement or a joint venture, as we are being now invited to do when the appellant is called upon to discharge its liability to pay service tax on the very same transaction. We do not accept this proposition as it is a settled principle in law that a party cannot approbate and reprobate on the same transaction. Approbate and reprobate are phrases borrowed from Scott's law. It would mean that no party is allowed to blow hot and cold in that they cannot be allowed to accept and reject the same thing. The Honourable Apex Court has in R.N. Gosain v. Yashpal Dhir, (1992) 4 SCC 683 (SCC pp. 687-88, para 10) held as under:
72
"10. Law does not permit a person to both approbate and reprobate. This principle is based on the doctrine of election which postulates that no party can accept and reject the same instrument and that 'a person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage'."
In the instant case, the appellant has considered the agreements as lease agreements to lease out the vacant lands and to secure the yearly lease amount as well as the additional lease amounts, and these have been represented as income from renting out the vacant lands by the appellant to the lessee before the Income Tax and State Tax authorities. Therefore, the appellant cannot at the same time now claim that these agreements are revenue sharing agreements for sharing profits to shirk and avoid its liability to pay service tax on the service of "renting of immovable property".
39. Trusts are invariably constituted with noble objectives, pious purposes, spiritual foundation and are stated to be for developmental projects. Nevertheless, when the transactions are such that they reflect an approach seemingly at variance with the stated objectives and deliberately malafide, we hesitate to show any misplaced sympathy.
40. We find that the Department has discharged its onus and has brought home the charges as alleged. We therefore hold that the appellant has provided the taxable service of "renting of immovable property service" in respect of the lands that the appellant has leased 73 out to Shri. M. Palanisamy (lessee) and consequently, the demand of service tax made on the appellant along with applicable interest and penalties as imposed, are tenable in law.
41. We find that the adjudicating authority has passed an elaborate, well-reasoned and fair order. In view of our above discussions and in these facts and circumstances, we find that the impugned order in original warrants no interference at our hand. We uphold the Order-in- Original No. Sl. No. 06-07/2018-COMMR. dated 25.06.2019 in toto.
42. The appeals are dismissed as devoid of merits.
43. Before parting with the order, we are constrained to observe that of late, we have been saddled, mercifully less often than not, with disparate written submissions running into 40-50 odd pages or more, with as many annexures of documents, circulars and case laws, and at times marked as Annexure A to ZZZ and then some more from a to s, or till the end of the alphabet string. It is appalling that such practice continues despite having been deprecated more than a decade ago by the Honourable Apex Court in its Judgement dated 11.09.2013 in Rashmi Metaliks v Kolkata Metropolitan Dev. Authority, 2013 INSC 606 : (2013) 17 S.C.R. 345, para 6,7 & 9 refers. Such verbose pleadings end up being more of a hinderance than assistance, creating more confusion and obscuring the facts than aiding the cause. It inexorably consumes tremendous amount of time as we necessarily delve into each judgement to discern whether it is applicable or not. Nevertheless, when 74 judgements are indiscriminately piled on in the submissions, we deem it wholly unnecessary to detail here why each one is inapplicable, merely because it has been placed in the compilation submitted. Rather than a judgement that contains the apt ratiocination, ten are placed before us, and the sheer plethora of citations makes it inevitable that the order abjures from discussing every such decision, else the consequence will be inordinately lengthy orders.
(Order pronounced in open court on 25.04.2025) (AJAYAN T.V.) (M. AJIT KUMAR) MEMBER (JUDICIAL) MEMBER (TECHNICAL) Vl